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Egypt public finance risks contained… for now

Egypt’s public debt dynamics look increasingly fragile due to a combination of the extremely short average maturity of its debt, rapidly rising yields, and a growing share of debt denominated in foreign currency. That said, for now, there are reasons to think that the sovereign should be able to muddle through. World with Higher Rates - Drop-In (21st June, 10:00 ET/15:00 BST): Does monetary policy tightening automatically mean recession? Are EMs vulnerable? How will financial market returns be affected? Join our special 20-minute briefing to find out what higher rates mean for macro and markets. Register now
James Swanston Middle East and North Africa Economist
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Middle East Economics Update

The economic impact of the Qatar FIFA World Cup

The 2022 Football World Cup that kicks off in November will provide a significant boost to Qatar’s economy in Q4, but we doubt that the economic legacy of the tournament will live up to officials’ expectations. That raises the risk of overcapacity in key sectors and strains in the banking sector.

15 August 2022

Middle East Data Response

Saudi Arabia Consumer Prices (Jul.)

Saudi inflation picked up to 2.7% y/y in July due to strengthening underlying price pressures, but we think that it is now at or close to a peak and will gradually fall back over the rest of this year and next. If anything, the risks are skewed to the downside given the growing likelihood of a cut to the VAT rate.  

15 August 2022

Middle East Economics Weekly

Egypt: PIF steps up investment; CBE rate hike on the cards

Saudi Arabia’s Public Investment Fund has stepped up investments into Egypt this week that will help to ease external financing concerns. At the same time, electricity rationing will begin next week to free up more natural gas (which Egypt relies on for power) for export in an effort to narrow the large current account deficit. However, these measures will only provide a short-term reprieve and a weaker pound and steps to attract more direct investment will be key to putting the external position on a more sustainable footing. Meanwhile, rising inflation is likely to prompt the Central Bank of Egypt to resume its tightening cycle with a 50bp hike, to 11.75%, next Thursday.

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More from James Swanston

Middle East Economics Weekly

Fed hikes, Egypt’s policymaking, Egypt-Israel-EU gas deal

Central banks in the Gulf followed the Fed in hiking interest rates and further tightening lies in store. But there are reasons to think that the region’s economies will be relatively unscathed by this. The likes of Tunisia and Egypt are more much more vulnerable to global monetary tightening. That said, after devaluing the pound in March, Egyptian policymakers seem to have moved to a more flexible exchange rate regime that will help to absorb strains in the balance of payments. Meanwhile, the EU signed a tripartite gas deal with Egypt and Israel this week that should provide a boost to Egypt’s energy sector over the coming years. World with Higher Rates - Drop-In (21st June, 10:00 ET/15:00 BST): Does monetary policy tightening automatically mean recession? Are EMs vulnerable? How will financial market returns be affected? Join our special 20-minute briefing to find out what higher rates mean for macro and markets. Register now

16 June 2022

Middle East Data Response

Saudi Arabia Consumer Prices (May)

Saudi inflation edged down to 2.2% y/y in May as food and transport inflation slowed last month, and, while we think that the headline rate will drift higher over the coming months, it is unlikely to reach the pace seen in other parts of the emerging world.

15 June 2022

Middle East Economics Weekly

OPEC+ fallout, PMIs, Tunisia austerity plans

Last week’s decision by OPEC+ to accelerate the pace at which it is raising its oil production quota will provide a fillip to economic growth in Saudi Arabia and the UAE. Meanwhile, May’s batch of PMIs further highlighted the growing divergence between the Gulf and non-Gulf economies. And finally, an austerity plan announced by Tunisia’s government this week may appease the IMF ahead of talks over a financing package, but passing such measures will be extremely difficult and ultimately Tunisia will continue on the path toward default.

9 June 2022
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